Can housing market crash?

So, can UK housing crash? Watch this space.

It is highly dependent on the area you are in. My flat in Central London has been relatively unaffected by the housing boom.

No, because you're boring.

Why are so many people so interested in propounding their thoughts on the housing market ? I don't know about on the other crossposted groups, but on uk.finance someone starts a new thread every week repeating the arguments from the previous threads.....

Where do you suggest this should be discussed if not uk.finance?

Not to that extent; no. With tulips and the South Sea bubble, the underlying investments were arguably of no significant value, so all of the price increase was due to momentum only, in a panicking market.

In housing, there's a chronic shortage of supply, so there are economic forces underpinning the pricing, even if things overcooked slightly.

In my (lay) opinion, what's caused the current market drop is three factors (IMHO):

1) The outpricing of first-time buyers, reducing the overall buying market size. This is a natural limiting factor, but wouldn't of itself cause a drop in pricing, just a stalling, and only at the bottom end of the market (but that does reduce momentum for upscalers); 2) Prices rising to the point where buy-to-let (one of the active market drivers) becomes uneconomical. Again, this is a momentum reducer, but not a downward pressure on pricing, and affects the market generally; 3) Up until the middle of last year, there was a fair amount of elective moves: that's to say, people moving house locally, because they felt like a change, or an improvement. Also, people were less worried about relocating, because of the general liquidity in the housing market. The Bank of England's pronouncements around mid-year, prophesying both future interest rate rises, and a fallback in house prices, killed both of these stone dead. This is the tipping point, the reason why house prices are now in recession. All of a sudden, many fewer houses are coming onto the market, many are being withdrawn, and people are now only considering moving if they have to. This illiquidity provides the downward pressure on the markets, and a revaluation free of the upwards momentum pressure.

I feel that the most likely consequence is a readjustment in house prices, back to a point where they represent a genuine valuation; i.e. their value in a stagnant market, rather than in an upwards-momentum- driven market. I've heard figures of 20-30% bandied round; these don't seem unreasonable. The drivers for downwards momentum will be the first two points. When the bottom-market houses are within reach of first-timers again, the momentum is likely to peter out into stagnation.

I doubt that buy-to-let will become a driver again for a while; the lettings market is probably now at an equilibrium point between demand and supply. It will likely remain so: when house prices become more affordable, people will move from tenanting to buying, releasing more ex-BTL property onto the market for them o buy. On the other hand, if prices rise again, it'll create a new opportunity for BTL buyers, and more tenants, so the demand-supply curve will probably be relatively level, give or take a little hysteresis.

Oh well, make of that what you will. But I don't think there will be an outright crash, as such, in the way that genuine (e.g. tulip) market bubbles burst, just a rerating.

Jon

Hi all, let`s call a spade a spade, the reason house prices, esp. ex.council houses, have reached obscene levels, is due to nothing more than peoples pure bloody GREED! welcome to america! regards all, doug

It looks to me like most first-time buyers are couples. If they both have £25k p.a. I think the going mortgage multiple for joint incomes nowadays is three. That means they can borrow £150,000. Add a £15,000 deposit and they could buy a starter home in most places, even London if they're prepared to look beyond zone 2.